08/16/2018

Reduce Your Risk of Credit Card Chargebacks

BASYS Processing, the Association's preferred credit card provider has contributed this article.

What is a Chargeback?

If you don’t know what a Chargeback is, congratulations!  Consider yourself one of the lucky ones.  For the rest of us, a Chargeback is a wicked little monster that pops its head up every once in a while.  The intent of this article is to help you, as the owner or manager of a business, understand Chargebacks, and provide 6 tips to reduce your risk of credit card Chargebacks. 

A Chargeback is essentially a refund, or credit, that a cardholder (your customer) requests from the bank that issues their credit or debit card.  Chargebacks can be requested for several reasons, but some of the most common are: 

– services / product not received

– theft / fraud

– incorrect dollar amount

The Chargeback Process

After a cardholder files for a Chargeback, the situation is reviewed by an independent third party that determines if the money in question should stay with the merchant (you), or be returned to the cardholder (your customer).  Before the final decision is made, you are given a chance to provide any supporting documentation to prove that the transaction is legitimate and the funds should stay with you.  However, during the decision process the funds are pulled from your bank account, and placed in a holding account until the decision is finalized.  In some cases, having that money removed from your account can cause a significant hardship.  So, reducing the risk of Chargebacks through everyday best practices can be very valuable. 

6 Tips to Reduce Your Risk of Credit Card Chargebacks

While it’s virtually impossible to avoid Chargebacks completely, below are 6 tips to minimize the situations that usually initiate the Chargeback process: 

1. Use a name that your customers will recognize as your credit card descriptor – this is the name that appears on your customers’ credit card bills or online statements – One of the biggest reasons merchants experience Chargebacks is because their customers simply don’t recognize where the charge came from. If the business name that will appear on your customer’s statement is different from the business name they’re familiar with (example: if you are part of another company), be sure to explain that beforehand and on their receipt. 

2. Make sure your terminals are EMV compliant – The additional security offered by EMV chips will help minimize fraudulent transactions, thus minimizing the possibility of a Chargeback. 

3. Always dip EMV chip cards, and swipe non-EMV chip cards, if possible – Keying in a card number manually for an in-person transaction not only costs more, but it is also less secure, and increases the possibility of a Chargeback. 

4. For any truly card-not-present transactions (over the phone or e-commerce), set your system(s) to require a match on AVS (address information) and CVV (three or four digit on the back of the card) – Forcing this data to match for an approval can drastically reduce fraudulent transactions, thus lowering your exposure for Chargebacks. 

5. Ensure careful data entry – Keying too many digits when putting in the dollar amount is one of the quickest ways to get your customers attention for all of the wrong reasons. Verbally double checking the order total with the customer before processing the sale is a great procedure for all point of sale staff to follow. 

6. Trust your instinct – A situation that seems too good to be true, or a customer placing a large order under odd circumstances, should raise a red flag and prompt follow up questions. This is not to say that everything out of the norm is fraudulent. However, being pro-active, and asking questions when a situation doesn’t make sense, can really help minimize your Chargeback exposure. 

Although there isn’t a perfect way to completely eliminate the possibility of a Chargeback, these 6 tips can certainly help you, as a business owner or manager, to do everything in your power to reduce the risk of Chargebacks. 

BASYS Processing as a credit card processor and business partner

Is your current credit card processor helping you with support items like reducing the risk of credit card chargebacks?  Are they satisfying all your needs for support, pricing, and helping your business grow?  If not, please contact your BDD for more information.  Let’s talk about creating a true business partnership that will help you meet and exceed your goals for your business.